In the process of analyzing financial results from the sale of assets of the enterprise, the reliability of their assessment is checked. In addition, the estimated income is compared with the probable cost of the related sales transactions. In the process of the subsequent analysis, the actual financial result is compared with the previously planned result.
When selling fixed assets, it is necessary to compare the probable profit with the income that the company can receive if it continues to operate. If it turns out that the sale of funds is more profitable, then it must be implemented. In addition to the profit and loss from the sale of assets, the company may receive non-operating results. Their indicators are not related to the sale of property, assets, etc.
Non-operating results
They are composed of:
- Operating profit / loss.
- Non-operating income / expenses.
- Extraordinary income / expenses.
The latter include:
- The value of the values that remain from the write-off of assets unsuitable for subsequent use and not subject to recovery.
- Insurance indemnities.
Extraordinary costs arise due to exceptional circumstances (floods, fires, nationalization of property, accidents, etc.). Operating profit consists of:
- Interest receivable.
- Income from participation in other companies.
- Other income.
Costs of this category are formed from interest payable and other expenses.
Analysis specificity
Non-operating, emergency and operational performance indicators of the enterprise are usually not planned. In this regard, the study of their dynamics is the main method of analysis. The indicators of the current and previous reporting periods are compared. In the process of analysis of each item of these income / expenses, it is necessary to identify the causes of their occurrence, determine whether timely measures were taken to pay off the debt, identify those responsible for missing the deadlines, and so on. The study of non-operating results allows us to assess the level of organization of the functioning of financial and marketing services, the degree of compliance with contract terms.
Net operating income
It is an indicator of the performance of an economic entity, which is found by subtracting expenses from ordinary activities from net revenue. Operating profit is almost equivalent to sales revenue. However, you should pay attention to a fairly common mistake. Operating profit is considered to have the same meaning as income before tax (EBIT). There is a significant difference between these indicators. EBIT includes expenses and income of the enterprise that are not related to its core business. That is, it is a non-operating profit. If the company has no other costs and revenues, then the figures will be equal.
Composition of income
The main factors in the formation of operating profit are:
- Volume of finished products sold.
- The structure and range of goods.
- Cost of manufactured products, retail and wholesale price.
Each specified factor includes smaller components. So, for example, the cost includes staff costs, depreciation.
Operating profit: formula
To determine the indicator, the following equation is used:
- Operating Profit = GP + OR - OE, where:
Gross income - GP.
Operating: OR revenues and OE costs.
Calculation procedure
The calculation of operating profit is carried out according to the following scheme:
- Costs are determined.To this end, the costs of staff salaries and other administrative expenses, business expenses (for example, for the services of an advertising agency) are added up. These expenses also include the total amount owed to creditors.
- The indicator is determined operating income. They include revenues from counterparties, interest received on funds placed, payment for leased space or other objects.
- Gross income is calculated. It is defined as the difference between the total profit and the cost of production.
The results obtained are substituted into the equation above.
Income management
As part of this activity, the company solves several important tasks that can be considered as stages of its administrative work:
1. Determined break even - such a volume of products sold that could cover the costs of its production.
2. The threshold of profitability for the long term is calculated. It is worth saying that long-term activities have a number of differences from short-term ones. In this regard, experts distinguish this task as an independent. The key differences between long- and short-term operating activities are the following factors:
- thanks to the efficient use of materials, variable costs per unit of production decrease over time;
- increase in sales volumes increases fixed costs, as additional employees and new machines are needed.
3. Determine the number of sales that would achieve the planned profit. The task can be posed in the opposite direction: to forecast income on the basis of current sales information.
4. The "safety margin" is determined. This is the minimum indicator of implementation, allowing the company not to go into minus. Safety margin is considered one of the key pricing factors.
5. The possibilities of increasing operating profit by reducing variables and fixed costs are evaluated.
Thus, the management of revenue generation is focused not only on determining the necessary sales volume, but also on finding ways to increase its indicator. Operating profit increases in various ways. The most common are minimizing costs, pursuing an effective assortment policy, and improving the quality characteristics of a product.
